Every product goes through a life cycle from development to decline. There are typically five stages: product development, introduction, growth, maturity, and decline. Each stage is characterized by different levels of sales, costs, profits, and competition. Companies employ different marketing strategies such as pricing, distribution, advertising, and promotions during each stage to successfully manage their products through the life cycle.

1. PRODUCT
LIFECYCLE

2. PRODUCT LIFE CYCLE
 Product Life Cycle (PLC):
 Every product goes through a life cycle
from development to decline
 Each life cycle is different
 Some products have longer lifecycles than
others
 Some companies are very successful in
extending lifecycles

3. PRODUCT LIFE-CYCLE STRATEGIES
 Product development
 Introduction
 Growth
 Maturity
 Decline
 Begins when the
company develops a
new-product idea
 Sales are zero
 Investment costs are
high
 Profits are negative
9 - 3
PLC Stages

4. PRODUCT LIFE-CYCLE STRATEGIES
 Product development
 Introduction
 Growth
 Maturity
 Decline
 Low sales
 High cost per customer
acquired
 Negative profits
 Innovators are targeted
 Little competition
9 - 4
PLC Stages

5. MARKETING STRATEGIES: INTRODUCTION STAGE
 Product – Offer a basic product
 Price – Use cost-plus basis to set
 Distribution – Build selective distribution
 Advertising – Build awareness among early
adopters and dealers/resellers
 Sales Promotion – Heavy expenditures to create
trial
9 - 5

6. PRODUCT LIFE-CYCLE STRATEGIES
 Product development
 Introduction
 Growth
 Maturity
 Decline
 Rapidly rising sales
 Average cost per
customer
 Rising profits
 Early adopters are
targeted
 Growing competition
9 - 6
PLC Stages

7. MARKETING STRATEGIES: GROWTH STAGE
 Product – Offer product extensions, service,
warranty
 Price – Penetration pricing
 Distribution – Build intensive distribution
 Advertising – Build awareness and interest in the
mass market
 Sales Promotion – Reduce expenditures to take
advantage of consumer demand
9 - 7

8. PRODUCT LIFE-CYCLE STRATEGIES
 Product development
 Introduction
 Growth
 Maturity
 Decline
 Sales peak
 Low cost per customer
 High profits
 Middle majority are
targeted
 Competition begins to
decline
9 - 8
PLC Stages

9. MARKETING STRATEGIES: MATURITY STAGE
 Product – Diversify brand and models
 Price – Set to match or beat competition
 Distribution – Build more intensive distribution
 Advertising – Stress brand differences and benefits
 Sales Promotion – Increase to encourage brand
switching
9 - 9

10. PRODUCT LIFE-CYCLE STRATEGIES
 Product development
 Introduction
 Growth
 Maturity
 Decline
 Declining sales
 Low cost per customer
 Declining profits
 Laggards are targeted
 Declining competition
9 - 10
PLC Stages

11. MARKETING STRATEGIES: DECLINE STAGE
 Product – Phase out weak items
 Price – Cut price
 Distribution – Use selective distribution: phase out
unprofitable outlets
 Advertising – Reduce to level needed to retain
hard-core loyalists
 Sales Promotion – Reduce to minimal level
9 - 11

12. PRODUCT LIFE CYCLE
 Extending the life cycle
 Diversification – have core product but
introduce new flavours/styles etc.
 Innovate – use new technology to enhance the
product
 Change flavour
 Repackage
 Advertise to appeal different audience
 Re-launch – product that have been withdrawn
can make comebacks if sold right e.g
skateboards, yoyos

13. Sales
Time
Effects of Extension
Strategies
Product Life Cycle

14. PRODUCT LIFE CYCLE
 Cash Flow and the Product Life Cycle
 During the development stage cash flow is
going to be NEGATIVE. Money has to be paid
out for equipment, wages etc but no money is
coming in.
 During the launch stage cash flow is still
NEGATIVE. More money is being paid out
than is coming in (as sales are very low at the
moment).

15. PRODUCT LIFE CYCLE
 Cash Flow and the Product Life Cycle
 During the growth stage cash flow may turn from
NEGATIVE to POSITIVE. Lots of money is coming in
but there are many outgoings because the firm has to
continue to promote the product and may need to
expand production and its workforce.
 During maturity/saturation and decline the cash flow
will be POSITIVE. The company spends little money
on promoting it. It doesn’t need to expand production
but sales are still coming in. Only during the decline
stage will sales be so low that cash flow might be
NEGATIVE.

16. Sales/Cash Flow
Time
PLC and Cash Flow
PLC
Negative Cash Flow
Positive Cash Flow
Product Life Cycle & Cash
Flow